The European Commission has made legally binding
under EC Treaty competition rules the commitments given by the five major music
publishers (BMG, EMI, Sony, Universal and Warner) and thirteen European
collecting societies (AEPI, AustroMechana, GEMA, MCPS, MCPSI, NCB, SABAM, SDRM,
SGAE, SIAE, SPA, STEMRA, SUISA), the signatories of the Cannes Extension
Agreement, regarding Central Licensing Agreements. The commitments ensure that
record producers can continue to receive rebates from collecting societies on
royalties paid in the context of Central Licensing Agreements. These rebates are
currently the only form of price competition among collecting societies. The
commitments also ensure that potential entry by collecting societies in the
music publishing or record production markets is not impeded. The Commission had
been concerned that two clauses of the Cannes Extension Agreement may have
violated the EC Treaty’s ban on cartels and restrictive business practices
(Article 81) but has now closed the case in the light of the
commitments.

Under a Central Licensing Agreement, a record company can obtain a copyright
license for the combined repertoires of all the collecting societies and
covering the whole of the EEA or part thereof, from any collecting society
within the EEA. Central Licensing Agreements are an example of how competition
among collecting societies for the granting of pan-European licenses can
function, to the benefit of all involved.

The Cannes Extension Agreement is an agreement between thirteen European
collecting societies managing mechanical copyright (the right involved in the
production of physical carriers of sound recordings, such as CDs) and the five
major music publishers, which are members of these societies. The Agreement
settles a number of issues regarding the relations between the two groups of
companies.

The commitments offered by the parties to the Agreement concern two clauses
of the Agreement on which the Commission had expressed its concerns. The first
commitment ensures that collecting societies may continue, in the context of
Central Licensing Agreements, to give rebates to record companies, paid out of
the administration fees that they retain from the royalties which they collect
on behalf of their members. Rebates are currently the only element of price
competition in this market. The second commitment consists in the removal of a
no-competition clause, which would have prevented collecting societies from ever
entering either the music publishing or the record production market.

The Commission decision, based on Article 9 of the procedural Regulation
1/2003 on the implementation of the EC Treaty’s competition rules, takes
into account the outcome of consultations on the commitments offered by the
parties to the Agreement. This decision ends the proceedings concerning the
Cannes Extension Agreement. However, if the parties to the Agreement were to
break their commitments, the Commission could impose a fine of up to 10% of
their total turnover without having to prove any violation of the EC
Treaty’s competition rules.